What’s going to happen if the Democratic Party gets its Blue Wave this Tuesday? My thoughts are as follows:

One way or another, this will be an obsession. If both houses go to the Democrats there will be a major media freakout/ feeding frenzy focusing on the negative: the Democrats … their business-unfriendly bias, their desire to reign in the business-friendly tax breaks ushered in last year and provide greater tax cuts for the middle class.

This obsession could likely drive the market lower on a short-term basis as those corporate cuts have given a big boost to earnings this year. Reversing them would very likely cause and “earnings recession” where corporate earnings would show a decline (without a part of the benefit from the lower tax rate) while the overall economy continued to grow. We had one of these in 2015/2016 because of a collapse in oil prices and the adverse effects of a very strong dollar.

Not to worry … Nothing along this line is likely to happen as long as Donald Trump is President. What about impeachment? Unless the Mueller Investigation comes up with super-clear evidence of “high crimes or misdemeanors” that is very unlikely. Even if they hold a trial in the House of Representatives and convict the president the Senate would be a very heavy lift. In the House it only requires a simple majority to send charges forward to the Senate for a trial(doable). However, in the Senate a 2/3 majority vote (67 Senators) is required to impeach (maybe not so doable).

Oh yes, lest we forget, even if impeachment occurs, Mike Pence would still be Vice President. It would be very unlikely for Mr. Pence to do or sign anything reversing current tax policy. I guess the Vice President might have some skeletons in his closet (i.e. he may have legal problems), but, for now, there appears to be nothing on the table alleging anything of this nature.

Worst case scenario for the market is that with a Republican House (or House and Senate) Donald Trump immediately becomes a lame duck. With most of the party’s policy agenda taken care of that may not be such a bad thing. A positive here is that it is Congress’ constitutionally appointed duty to set tariffs and duties. If they reassumed that responsibility, I  think the market would like it.